No changes were announced to income tax, so the freeze on personal tax thresholds until 2028 remains. Does this make up for the tax threshold freeze? Class 1 also counts towards additional state pension and the new-style jobseeker’s allowance. Those who have built up enough years of contributions qualify for the basic state pension, while class 1 and class 2 contributions buy entitlement to employment and support allowance, maternity allowance and bereavement support payment. National insurance in effect buys workers an entitlement to a range of state benefits. Taking just the latest announcement, for those earning £20,000 from employment, the new 2p cut is worth £148.60 a year, and for those earning £50,000 it is worth £748.60.Īnyone earning enough to pay higher-rate tax will take home £754 a year more than expected.Īn average self-employed person on £28,000 will save about £650 a year from both cuts, the Treasury says. It says the average teacher on £44,300 will gain £1,250 a year. The Treasury says that the average worker on £35,400 will save more than £900 a year as a result of the cuts in January and April. It will also abolish class 2 self-employed NICs. On the same date, the government will reduce the class 4 self-employed NICs rate from 9% to 6% – this is a bigger reduction than had been planned. This follows a cut from 12% to 10% in January. The main rate of class 1 national insurance will be cut to 8% from 6 April 2024 – the start of the new tax year. That same person also pays class 4 contributions, which in the current tax year are equal to 9% of their profits between £12,570 and £50,270, and 2% above that. Someone who is self-employed with a profit of £12,570 or more a year pays the class 2 contributions rate, which this year is £3.45 a week. They pay 2% on all earnings above £967 a week – which equates to an income of £50,284 a year. In some years the government tops up the fund, while in others it uses the surplus for government expenditure elsewhere.Īn employee who earns more than £242 a week, or £1,048 a month, in a job, now pays 10% in class 1 national insurance contributions. National insurance is paid into the national insurance fund, which is used for benefits but is not ringfenced. National insurance is paid between the age of 16 and the state pension age. Class 3 is voluntary, and these contributions are paid by workers who want to build up their entitlement to benefits. To make things complicated, there are several classes, with separate ones for employees, employers and self-employed people, and some payments are voluntary, while others are mandatory. It is also paid by employers, and unlocks access to certain benefits, including the state pension. Workers pay it on earned income only – so it does not apply to interest on shares or money from pensions.įor employees, it is charged according to each job, rather than their total income, so those who have multiple low-paid jobs may not pay as much as someone earning the same amount from a single position. The template may NOT be sold, distributed, published to an online gallery, hosted on a website, or placed on any server in a way that makes it available to the general public.National insurance is similar to income tax and is taken from salary or, for self-employed people, through self-assessment, but there are differences. Licensed for Private Use Only (not for distribution or resale)
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